South Africa’s Ramaphosa May Ease Investor Concerns: S&P

Dec. 21 (Bloomberg) -- The election of Cyril Ramaphosa as
deputy president of South Africa’s ruling African National
Congress will probably help ease investor concerns about
government policy, according to Standard & Poor’s.

While the party avoided any shift toward a “populist”
stance at its conference this week and rejected nationalization
of mines, it has to be more specific about how it will tax
mining companies, Christian Esters, a credit ratings analyst at
S&P, said by phone from Frankfurt today. South Africa remains on
a negative credit rating outlook, he said.

“You could argue that it should create some comfort for
investors that the ANC policies will be mindful of business
needs,” he said about Ramaphosa’s election. “The mining
industry is probably still looking for more clarity on the tax
regime and regulation.”

South Africa’s credit rating has been cut twice this year
as the slowing economy, rising unemployment and strikes fueled
investor concern that the government would boost spending on
grants to the poor, widening the budget deficit. S&P and Moody’s
Investors Service have a negative outlook on BBB and Baa1
ratings, respectively. Both are investment grade.

Questions Remain

The ANC re-elected President Jacob Zuma as party leader and
picked Ramaphosa, the second-wealthiest black South African, as
his deputy this week. Delegates at the conference resolved to
consider raising taxes on mining companies and increase
“strategic state ownership” in the economy.

Moody’s won’t make a decision on the credit rating “until
there is greater clarity” on some of the policies that were
adopted, Kristin Lindow, sovereign-rating analyst, said in an e-mailed statement.

“In particular, questions remain as to how changes to
mining taxes will operate in practice,” she said. “It is still
not clear what form government intervention in these matters is
supposed to take.”

The rand weakened 1 percent against the dollar to 8.5605 by
3 p.m. in Johannesburg, erasing gains since Dec. 17, the day
before the ANC elections were announced.